It’s not often I have to start a column with an apology, but given how peremptory this title may seem, I feel I must. I’m sorry for its abruptness, but it is a refrain I have had to hear often this last month. There are no jobs, my Singapore-based French banker friend said to me. There are no jobs his head-hunter said to him. Ditto to another friend covering Asia from London, yet another who structures products for private banks and one who has two decades of private banking experience, at least half of it in Asia. There are no jobs.
Anecdotal evidence certainly seems to confirm rather than refute this – the deep cuts at several banks in Singapore and Hong Kong this last month and the expectation that more will be announced this month – have sent us into a summer more sombre than we would have liked. I have circulated many resumes and made many introductions this last month and haven’t had any positive feedback on any except one. Could it be true – are there no jobs?
Absolutely not. “I think your point may be that there is no real capacity for addition this year; the jobs you’re referring to are more optics than anything else – banks buying books from one another is the usual course of business,” explains one private banking CEO. “There are no new jobs coming online in Asia.” Absolutely not. I am talking about a net addition in headcount to the industry as a whole.
To those among you who are disheartened by this anecdotal evidence, let me offer you something to the contrary. I have it on good authority that Julius Baer, one of the most aggressive employers in the industry, is adding a whole new floor to its IFC offices. UBS, which was in the of the storm as far as the job cuts last month were concerned – is expanding to a third floor in its new Kowloon offices only a hundred days after opening with two floors. Expansion at this pace is not possible by cherry picking ‘books’ to buy – this is capacity addition. Even as we watch the implied exit of several banks from the wealth management industry, the hiring freeze at at least two banks that I know of has been lifted. For every boutique adopting a “hands-off” approach to certain markets, there is an Asian giant with the ability and the will to invest in new markets.
In essence, the market has been cleaved into those private banks that will continue to invest and those that have been forced – either because private banking makes a negligible contribution to group revenues or for other strategic reasons – to hit pause.
Will we continue to hear of cuts in the coming months? Yes. 5% of poor/marginal performance turnover is the ideal attrition rate for most companies. But even those that are culling in some roles/markets are hoping to make net additions to headcount this year.
Take Credit Suisse for example, another aggressive employer in Hong Kong and South Asia. Despite the thousands of jobs it is expected to cut globally, the bank has reiterated its target headcount of 800 RMs in Asia by 2018 (it had 590 at the end of 2015).
And why would it not? The region has provided a 20% return on capital across all businesses. This automatically implies a net addition of 80 RMs a year and given that in North Asia it has already grabbed 47 new RMs in the year to date (50% of these were director level or above), I suspect the North Asian franchise will overshoot its 50% of this target.
What has changed is the mathematics. On average, it costs a little over a million dollars to maintain a single relationship manager on a large platform – costs include compensation, operational expenses, platform-driven costs, support costs, compliance costs etc. With the bar this high, banks simply cannot afford to hire candidates to “give them a go”.
On the other hand, ever-evolving KYC and other compliance requirements have made it impossible for new joiners – however competent they may be – to “plug and play”. Again, using very broad brush strokes, we are still talking about an asset transfer rate of 20-40% over six months.
Given these dynamics, banks have been compelled to raise the bar – new joiners are now expected to bring US$30 million in assets to the bank at the AVP (assistant vice president or equivalent nomenclature) level, US$50 million at the VP (vice president or equivalent nomenclature) level and US$100 million for anyone who is going to draw a director-level or above salary.
The good news? For those who meet these expectations, the trappings of a bull market still apply – multi-year guarantees, hand-picked teams, access to balance sheet with favourable credit terms.
The bad news? For those who don’t meet the bar – there are no jobs.